Industrial Restructuring Led by China's "Notorious ...

New Generation, New Path: Industrial Restructuring Led by China's "Notorious" Fuerdai Generation Shengjun Zhu, Tu Lan, Canfei He China Review, Volume 17, Number 3, October 2017, pp. 1-30 (Article)

Published by Chinese University Press

For additional information about this article https://muse.jhu.edu/article/676362

Access provided by Peking University (4 Dec 2017 10:38 GMT)

The China Review, Vol. 17, No. 3 (October 2017), 1–30

New Generation, New Path: Industrial Restructuring Led by China’s “Notorious” Fuerdai Generation* Shengjun Zhu, Tu Lan, and Canfei He

Abstract While “the second generation of the rich” ( 富二代 Fuerdai) has received plenty of attention and criticism in modern China, this article pays attention to the ways in which they are stepping up to play a key role in China’s economy as they hit their 20s and 30s. We are particularly interested in the roles played by the Fuerdai in the process of industrial restructuring and the ways in which China’s coastal clusters have been evolving with the formation of a new generation of entrepreneurs. This article examines a specific apparel cluster in Ningbo, China. It compares two types of enterprises through the lenses of three categories—political, functional, and cognitive lock-in—to understand the ways in which the Fuerdai is bringing new life into the local cluster. We show that the

Shengjun Zhu is Assistant Professor in the College of Urban and Environmental Sciences, Peking University, China. Tu Lan is Assistant Professor in the Department of Geography, University of New Hampshire, USA. Correspondence should be sent to: [email protected]. Canfei He is Professor in the College of Urban and Environmental Sciences, Peking University, China. *We are indebted to the entrepreneurs, scholars, government officials, and industry association in Ningbo’s apparel industry who generously shared their time and stories. This work was supported by the Natural Science Foundation of China (No. 41425001). The authors are responsible for all errors and interpretations.

2

Shengjun Zhu, Tu Lan, and Canfei He

new-style enterprises, created by the succession of a new generation, often display more openness, and therefore features of cognitive, functional, and political lock-in may be broken.

Deng Xiaoping famously said “to get rich is glorious,” signifying a break from the socialist, Maoist early days of modern China. This new tenet was taken to heart by Chinese people, and the country saw its wealth grow at an unprecedented rate. Driven by the combination of internal reforms and international demand, China’s average annual GDP growth rate has been around 9.8 percent, and exports increased by 12.4 percent annually in the 1990s and by more than 20 percent in the 2000s before the global financial tsunami hit in 2008. As a result of the unimaginable economic growth, China is now home to 157 billionaires, and reports have predicted the number of millionaires will reach two million by 2018.1 The remarkable growth in the number of wealthy individuals in China — a country that teetered on the edge of financial ruin four decades ago — has changed the face of modern China, giving rise to a whole new social group: “the second generation of the rich” (富二代 Fuerdai), a generation of individuals born in the 1980s who grew up with a silver spoon in their mouth. While the Chinese nouveau riche of the early years of China’s reform era ( “the first generation of the rich” (富一代 Fuyidai) reached their socioeconomic position through their own initiatives and efforts, their sons and daughters often enjoy a comfortable lifestyle and have a much easier and obstacle-free life path. These newcomers have often been considered as extremely spoiled, unmannered, and materialistic who obnoxiously spend their parents’ money on luxury goods, supercars, parties, gambling, and drugs and flaunt their lifestyle and wealth, and therefore have received plenty of attention and criticism in modern China. However, this article focuses on the ways in which they are stepping up to play a key role in China’s economy as they hit their 20s and 30s. More than just rich children, this social group could have monumental effects on China’s industrial restructuring since the early 2000s.2 The rise of China as the “world factory” since the 1980s has been driven largely by global sourcing practices intent on capturing the cost advantages of a development model predicated, in part, on unskilled or semiskilled migratory labor flows linking inland labor pools to coastal production sites.3 The apparel industry exemplifies this export-oriented

Industrial Restructuring Led by China’s “Notorious” Fuerdai Generation

3

industrialization model. Production and employment in the apparel industry have become heavily concentrated in the coastal regions of east and southeast China.4 Since the early 2000s, coastal clusters have progressively had to confront difficulties generated by the increasing social and economic costs of a regionally concentrated low-wage growth model that has resulted in poor working condition and increasing pressure for higher quality and higher wage opportunities.5 Alongside these significant and rapidly changing labor market dynamics, other factors have also been important, including labor shortages fueled by low wages and poor working conditions, the appreciation of China’s currency, slackening global demand especially after the outbreak of the financial crisis, and new regulations dealing with environment, labor law, and an expanded role for corporate social responsibility.6 These exogenous shocks have, in turn, triggered industrial restructuring in China’s coastal clusters. This article draws on several concepts developed in evolutionary economic geography (EEG) as well as ideas developed in family-business studies to analyze the restructuring of China’s apparel industry. We are particularly interested in the roles played by the Fuerdai in the process of industrial restructuring and the ways in which China’s coastal clusters have been evolving with a shift in the cluster’s context and the formation of a new generation of entrepreneurs. While some of the Fuerdai are overprotected by their parents and lack basic values that make a society function properly, others are well-educated and follow the footsteps of their parents’ success by working hard to maintain the family fortune.7 As there are hush critics toward these newcomers, some of the latter maintain a low profile, and try to prove that they can create something new and meaningful, or at least inherit the family business and maintain it. According to our interviews, they prefer to be called “the second generation of entrepreneurs” (創二代 Chuangerdai), rather than Fuerdai. The Fuyidai who shaped the formation of industrial clusters in China in the reform era are now retiring from work. The succession of the Fuerdai, with different life experiences, knowledge, and values, potentially has fundamental effects over the development of China’s industrial clusters, and is challenging existing cluster structures and development paths. To illustrate the roles of the Fuerdai in the process of industrial restructuring in China’s coastal clusters, we examine an apparel cluster in Ningbo, China. The following section presents a conceptual account. After an outline of the research methodology in the second section,

4


section 3 provides an overview of Ningbo’s apparel cluster. The fourth section describes the roles of the Fuerdai in the process of industrial restructuring. The last section concludes the article.

1. Understanding the Dynamics of Cluster Evolution a. Three Types of Lock-In Industrial clustering has long been recognized as important in the ways in which firms are able to develop and deepen interfirm linkages, which in turn result in expanded forms of interaction and trust.8 In this view, geographical clustering of industrial activities positively affects competitiveness, and studies of such clustering and networking effects have been vital in reshaping institutional approaches to economic geography. However, recent studies focusing on the role of path dependence and lock-in have begun to also focus on the negative effects of clustering,9 particularly in explaining the decline of old industrial districts or clusters and the inability of firms in them to respond adequately.10 As Grabher argued much earlier, “the initial strengths of the industrial districts of the past — their industrial atmosphere, highly developed and specialized infrastructure, the close inter-firm linkages, and strong political support by regional institutions — have, in some cases, turned into stubborn obstacles to innovation.” 11 Such obstacles have given rise to what Hassink and Shin have termed the “rigid specialization” trap, where geographically concentrated clusters become insular and inward-looking systems.12 Here, the notion of “lock-in” has been coined to describe those situations where the processes that cause path dependence gradually lead to increasing fixity or rigidities in the patterns of industrial activity.13 Based on the empirical investigation of the steel and coal-mining complex in the Ruhr area in Germany, Grabher identified three types of lock-in: functional, cognitive, and political. Functional lock-in refers to economic interdependencies between firms in the value chain.14 The key feature concerns a particular network constellation that negatively affects necessary economic renewal. Firms and local networks become narrowly focused on a certain type of retrogressive economic activities that is unable to shift into a new restructuring track.15 This functional lock-in may arise from long-standing, stable, and close interfirm relations and ties that prevent the development of boundary-spanning functions, and is


5

sometimes reinforced by cognitive lock-in. Cognitive lock-in refers to long-term personal ties that result in mutual orientations involving a common language regarding technical matters, contracting rules, and knowledge on which the involved parties can draw in communicating with one another. Personal cognitive lock-in often arises when locally prevailing common orientations and interpretative mechanisms become rigid and hamper good and positive changes in the regional economy. This is, as Cho and Hassink argued, compounded by “local entrepreneurs’ avoidance of technological innovation or new venture that may require cost in the short run, but could bear benefit in the long run.” 16 If this type of entrepreneurial ethos persists, firms tend to be conservative and even fixated on their interests embedded in existing industrial activities. Finally, political lock-in refers to a conservative culture of cooperative relations between industry, public authorities, unions, and industrial associations, which obstructs a timely reorganization of a region and paralyzes political innovation. Such a conservative culture within the politico-administrative system tends to preserve existing traditional industrial structures, and therefore slow down industrial restructuring and inhibit the development of indigenous potential and creativity. Local authorities and firms, especially large ones, form a so-called selfsustaining coalition constantly lobbying for sectoral interventions often at a national or subnational level that constrain industrial restructuring and cripple the spirit of the Schumpeterian entrepreneur.17 b. Heterogeneity of Agents For Martin and others, the canonical path dependence model, formulated by Arthur and David, has overlooked alternative possible trajectories of cluster evolution.18 In this reading, once a cluster or regional economy enters into lock-in phase, it will remain trapped in that stable state until it is disturbed or liberated by some unpredictable and unexpected exogenous shock.19 According to David and Arthur’s very notion of “pathdependent equilibrium economics,” history for all intents and purposes ceases once the system becomes locked into an “equilibrium” state. However, Martin and Sunley have argued that history indeed keeps unfolding in a path-dependent manner, and the idea of path dependence should not be circumscribed by any form of equilibrium thinking.20 This idea was further developed by Martin and Sunley when they employed a modified regional adaptive cycle model and introduced much more

6


diverse trajectories of regional economic evolution.21 The gist of their argument for our present purposes is that apart from being stuck in a state of fixity and rigidification and waiting for an unpredictable exogenous shock to set it free, a regional economy can evolve along another trajectory where firms in the region are able to innovate more or less continuously and the industrial structure constantly mutates and adapts. The focus on exogenous shocks in the canonical path dependence model has meant that the role of individual agency in reworking or disrupting forms of path dependency and creating new pathways is much less well developed over against the much stronger analytical focus on the role of external shocks in dislodging stable, inflexible, or rigid clusters. To counter this lacuna, Martin and Sunley have suggested that, while the rigidification of firms, networks, and structures in a cluster may weaken the vitality and adaptability of the cluster resulting in cluster atrophy, it may also encourage or enable a reorganization of resources and greater opportunities for surviving firms or may force purposeful action by individual actors in a cluster who are deliberately trying to de-lock themselves.22 In this way, the entire system may dislodge itself from an old path and create a new one.23 Therefore any theory of path creation should not underestimate the importance of strategic agency and the deliberate, mindful deviation of entrepreneurs from established paths.24 In the canonical path dependence model, the regional economy and cluster tends to be treated as a homogenous entity that forms the unit of analysis, and there is a tacit assumption that all cluster firms are relatively homogenous and that they do not merit attention in their own right.25 Martin, however, pointed out that regional economy, industrial district, and cluster are composite systems, consisting of numerous heterogeneous firms with different market orientations, specific technologies, competences, resources, and business models, even though the firms may all belong to the same industry.26 In other words, homogeneity is rare, and cluster firms often vary dramatically in their innovative and productive performance and developmental trajectory. Given the fact that firms often compete and survive or fail on the basis of such differences, it may be inappropriate to examine the dynamics of cluster evolution only through meso- or macro-level analysis without paying special attention to micro-level heterogeneity or variety. Variety could not only be a source of regional knowledge spillovers, measured by related variety with the same industry, but also generate diversity and continual regional


7

adaptability, in the case of unrelated variety.27 New path creation of clusters is more likely to occur in regions with varied structures, and heterogeneity of agents can help in explaining why “lock-in” might not occur. c. Intrafirm Dynamics and Family Firms In addition to paying attention to firm agency and micro-level, firm-level heterogeneity or variety, we also acknowledge that studying dynamics of cluster evolution requires a clearer understanding of intrafirm dynamics. Although the firm is clearly, and explicitly, the central actor in all analyses, intrafirm processes remain something of a “black box.” 28 Opening up the “black box” of the firm in this way has important advantages. It allows us to explore the complex ways in which enterprises respond differently to similar economic imperatives and competitive pressures, to interpret how dynamic firms with strategic intent can alter the status quo, and to take into account intrafirm processes that lead to productive and innovative performance change.29 Specifically, in our case, this calls for a close investigation of family firms’ internal dynamics, such as the succession of a new generation of entrepreneurs, and managerial and organizational change. It is widely acknowledged that family ownership is a risk-reducing device particularly in contexts characterized by high transaction costs and uncertainty, but, under some conditions, the coexistence of kinship ties and business activities can also result in an increase of organizational “entropy” and thus amplify internal turbulence.30 In a seminal article, Kets de Vries listed the strengths (e.g., long-term orientation, continuity in leadership, financial commitment, independence of action, flexibility, easier knowledge transmission, identification, and commitment) and weaknesses (e.g., messy organizations, nepotism, unwillingness to grow, successor of frustration, autocracy, succession troubles, financial strain) of family firms.31 As a result, one key question in family business studies is how this form of organization behaves and performs differently from the non–family firm. While much of this research focuses on a range of dichotomies between “family firms” and “non–family firms” in mature markets and developed economies (e.g., United Kingdom, Spain, and Italy),32 this article studies the performance difference between family firms and non– family firms in a developing economy — China — and, more importantly, situates this comparison in the conjuncture of China’s industrial restruc-

8


turing in general and an apparel cluster’s lock-in/out in particular. In China, the family firm serves as one of the key economic institutions or organizational platforms for the continuous accumulation of wealth by Chinese entrepreneurs that in turn represents the rationality of Chinese capitalism.33 It is organized around a particular social system of economic activities that are embedded in complicated webs of social networks and family relationships.34 Despite rapid diversification and expansion in recent decades, the primacy of the family has been maintained in China.35 Much of its effectiveness derives from intense managerial dedication, much of its efficacy from creating a working environment that matches the expectations and interests of employees from the same family. However, if insiders are typically preferred to outsiders in family firms, the process of securing generational transition could be fraught with conflict and become the most traumatic internal shock facing family firms.36 Scholars are familiar with tales of greed, ambition, and the successive lack of ambition in later generations, which serves to undermine business that once flourished, epitomized in the so-called Buddenbrook effect — the three-generation life cycle of family firms (i.e., growth, stagnation, and decline associated with each of the three generations of family firms).37 Although the Buddenbrook syndrome and three-generation model are given little credence, evidence does suggest that persistent insider succession may give a firm an inward- rather than outwardlooking business culture.38 The universal three-generation model may be useful for explaining the failure of some Chinese family firms to extend beyond three generations in the twentieth century as fairly enduring institutional contexts provided little incentive for different generations of family members to change.39 However, in the twenty-first century, the new generation of Chinese family firms is often endowed with different sorts of entrepreneurial tendencies from their parents or even grandparents. Yeung has pointed out that, recently, most successors to Chinese family business have been sent to top business schools abroad, the eventual return of whom has changed the intrafirm dynamics in Chinese family firms in two ways.40 Personal contacts and relationships developed by these successors abroad potentially widen the social and geographical scope of Chinese family firms’ business networks and blur the line between insiders and outsiders. In addition, the return of professionally trained family heirs represents an important step toward the professionalization


9

of Chinese family firms, as the new generation is likely to adopt a much more open view toward the involvement of professionals in the management of the Chinese firms. Such intrafirm dynamics may allow Chinese family firms to lock-out and survive beyond the classic dilemma encapsulated in the three-generation model. d. Toward an Analytical Framework Inspired by these studies, we formulate a heuristic analytical framework that aims to be sensitive to the impacts of political, functional, and cognitive lock-in/out over firms’ development, but which does so by stressing that these impacts are simultaneously “inflected” by interfirm heterogeneity and intrafirm dynamics. In Figure 1, we use the transition from solid arrow to dashed arrow to indicate such an “inflection” effect caused by interfirm heterogeneity and intrafirm dynamics. Figure: 1: A heuristic analytical framework for cluster evolution

On the one hand, intrafirm dynamics may produce lock-ins in some firms. Decades of close relations between these firms and the state may lead to a local conservative regime that inhibits further adaptation of firms, resulting in political lock-in. Long-term personal networks can generate similar reactions to market fluctuation and technological opportunities (cognitive lock-in). Partly due to cognitive and political lock-in,

10


these firms are increasingly reluctant to innovate and exclusively concentrate on certain activities, giving rise to functional lock-in. On the other hand, intrafirm dynamics in some other firms may trigger lock-outs. Such firms differ in terms of their employment and output sizes, but also in terms of their historical legacy, political embeddedness, and intrafirm dynamics. Here we are particularly interested in the impact of one type of intrafirm dynamics — intergenerational transmission of leadership in family firms, driven by which the agents’ relationships that were established in previous interactions may change, and new ideas may emerge. Some new ideas may fail, but there are also successes, which may reorder the existing economic, political, and social context and change the existing development path. Such firms with new, proactive entrepreneurs and weak connections with the state are characterized by high adaptability. In sum, the succession of a new generation of entrepreneurs may affect firm-specific assets and lead to dynamic processes of lock-out and new path creation. We thus seek to understand the roles played by the Fuerdai in the process of industrial restructuring, and stress that China’s coastal clusters have been evolving in ways that are inflected by both interfirm heterogeneity and intrafirm dynamics.

2. Research Design This study was undertaken based on recent field investigations from 2011 to 2013 in Beijing and Ningbo, China. The empirical foundation included qualitative in-depth interviews with four groups of agents. Due to confidentiality agreements with the companies, the identities of firms and interviewees remain anonymous. All interviews were conducted at the management level, and each was accompanied by a shop floor visit to see the plant in operation. A total of 42 face-to-face interviews were conducted with 31 entrepreneurs, 14 of whom are Fuerdai entrepreneurs. In addition, two interviews were conducted with local government officials. Four interviews were conducted with representatives from the local apparel industry association (Ningbo Garment Association) and another three interviews with representatives from the national apparel industry association (China National Textile & Apparel Council and China Textile Planning Institute of Construction). Moreover, six interviews were conducted with the leading scholars of the apparel industry in China, including professors from Peking University, Zhejiang Normal


11

University, and Zhejiang Textile & Fashion College. The average duration of each interview was approximately two hours, and interviews with key informants such as representatives from the apparel association and government officials and several leading entrepreneurs took half a day. When possible, informants were interviewed more than once. Local government and the apparel association were first contacted and interviewed, to understand the general structure of Ningbo’s apparel industry. After this, interviews with local apparel entrepreneurs were organized with the guidance of local government and the apparel association. The data gathered in the interviews were complemented with background information about the specific firms and the industry more broadly collected from sector-specific publications, company reports, and websites. In addition, analysis of available secondary sources was carried out, tapping both the academic and business literatures.

3. Development of Ningbo’s Apparel Industry Cluster Ningbo is one of the biggest apparel clusters in China (Figure 2) — it produced around 1.03 billion pieces of apparel product in 2011, accounting for 28.35 percent of the provincial production capacity and 4.05 percent of the national total domestic garment production.41 By the end of 2011, there were around 290,067 workers employed directly in Ningbo’s more than 2,000 textile and apparel enterprises. Major products include male suits, knitted garments, and men’s shirts. The traditional Ningbo model was a system of production centered on family workshops and embedded in dense, historically rooted local institutions. Families typically formed the main productions units, relying on social networks and sales agents who linked producers in Ningbo and domestic-oriented retailers in Shanghai.42 Ningbo was a leading region in reforming its economy: when China was still dominated by state-owned enterprises, family business units and town and village enterprises had already become the backbone of Ningbo’s apparel industry. At this stage, development of its apparel industry was largely driven by its supplierbuyer links with Shanghai based on geographical and social proximity on the one hand, and its historical legacies of craft production and trading on the other. As a result, Ningbo’s apparel products began early on to penetrate domestic markets that were still dominated by the planned economy and plagued by shortages.

12


Figure 2: Location of Ningbo

Since the institution of the reform and opening-up in 1978, Ningbo’s apparel industry has experienced two main rounds of restructuring. The first round of restructuring was stimulated by an enormous increase in international demand for export goods, especially those dependent on low-wage and unskilled or semiskilled labor and low-cost factor inputs. Ningbo’s apparel firms quickly improved productivity, expanded their capacity, captured economies of scale, and tied their production process more closely to the demands of global buyers. The first round of restructuring centered on a process of transformation from small family business units to legally registered enterprises and a process of privatization from state-owned enterprises to private or joint-venture enterprises. As marketization, privatization, and globalization proceeded, local apparel manufacturers sold their own brands in the domestic market and began to supply global buyers as sourcing increasingly shifted from Hong Kong, Taiwan, and South Korea to mainland China. In the 1990s, exportoriented production surpassed domestic-oriented production and soon composed the bulk of Ningbo’s apparel industry. In the late 1990s and early 2000s, nearly two-thirds of Ningbo’s apparel firms exported over 90


13

percent of their production, making it one of the largest apparel manufacturing and marketing bases in Asia.43 The first generation of entrepreneurs (i.e., Fuyidai) played a key role in shaping the formation of industrial clusters in China during the transition period. In the mid- to late 2000s, this export-oriented, low-wage model started to be challenged by rising labor costs and shortages in China’s coastal region.44 Alongside the significant and rapidly changing labor market dynamics, other factors were also important, including the appreciation of China’s currency, slackening global demand especially after the outbreak of the 2008 financial crisis, new environmental regulations, the effects of China’s new Labor Law, and the spread of expanded corporate social responsibility requirements in the industry.45 Dwindling international demand led to a second round of industrial restructuring in Ningbo’s apparel firms, as many more took advantages of the new opportunities generated by a booming domestic market to adjust to weakening export orders. In the meantime, starting their business in the 1980s, many early entrepreneurs were approaching retirement and the Fuyidai began to pass the family business to the second generation of entrepreneurs (Fuerdai). The old development path therefore started to change with the succession of a new generation of entrepreneurs with different knowledge and experiences. As costs rose and competitive pressures increased, some new apparel entrepreneurs recognized the unsustainability of labor-intensive, low-value, and low-end assembly and original equipment manufacturing (OEM) production, and sought to establish core competencies in higher-value OEM, original design manufacturing (ODM), and original brand-name manufacturing (OBM) production. Ningbo’s new entrepreneurs either opted for upgrading to high-value OEM, ODM, and OBM production after years of supplying global brands, or started new businesses directly from high-value OEM, ODM, or OBM production. As a result, the decade of the 2000s witnessed the advent of not only a new generation of entrepreneurs, but also a new type of enterprises whose characteristics were increasingly related to mediumand high-value production for domestic markets. This evolution of Ningbo’s apparel industry has also been shaped by the broader context of regional economic regulations and policies, and by the ways in which locally rooted institutions operated under state socialism and continue to do so. First, firms benefit from labor pools and interfirm synergies they have cultivated over time, resulting in

14


complicated vertical and horizontal linkages within the cluster. Far from the independent producers assumed to typify many export processing platforms, Ningbo’s apparel enterprises emerged within locally based intensely interwoven networks of trust and personal relationship. Second, between the first and second rounds of industrial restructuring, the rapid economic growth and export boom in Ningbo had been partly driven by China’s central government’s commitment to encouraging private-sectorled export-oriented industrialization.46 State-led decentralization policies further empowered local governments to get involved in shaping the regional economy as planners, developers, and policy makers, and some of them have become heavy-handed actors that are ever more convinced of the importance of their “steering” role. The Ningbo government has been especially active in pushing forward its apparel industry by offering financial and technological support to key enterprises for investments in upgrading, supporting the Annual Ningbo International Fashion Fair, and coordinating between large and small firms.47

4. New Generation, New Path China’s reform and opening-up policies triggered the first round of industrial restructuring in Ningbo’s apparel industry, wherein the first generation of entrepreneurs played a critical role in shaping the formation of industrial clusters, giving rise to an export-oriented development model. The succession of a new generation of entrepreneurs, the Fuerdai, with different life experiences, knowledge, and values, potentially has had fundamental effects over the development of Ningbo’s apparel industrial cluster and is challenging existing cluster structures and development paths. To understand the ways in which the Fuerdai is breathing new life into the local cluster, we compare two types of enterprises through the lenses of three categories — political, functional, and cognitive lock-in.48 The first type of firm is often big in terms of employment and output size. Such firms are key employers and taxpayers, and therefore are favored by and have close connections with local administrations. Such close connections also derive from the historical legacies of these enterprises, which mostly evolved from state-owned enterprises or town and village enterprises and became joint-venture or private enterprises through a process of complete or partial privatization during the 1980s and 1990s. The heads of this type of enterprises are often red capitalists who are Party members or were formerly Party and government


15

officials,49 and therefore they are not able to make decisions and implement certain corporate strategies independently. China’s Communist Party and governments have significant influence on firm strategies and, in some instances, have a say on the appointment of management staff at the top level, including the head of the enterprise. In these firms, entrepreneurs (red capitalists) cannot easily pass the business to their descendants, unless they have permission from the Party and governments. In other words, sometimes there is no intergenerational transmission in such firms. The second type refers to medium-sized firms that evolved from family workshops and small family business units to legally registered private enterprises and are embedded in dense local social networks. Such family business is completely owned and established by the head of the family, in the formal position of owner-manager. Entrepreneurs mostly started private family business during the 1980s and 1990s from scratch, and came cultivated a massive fortune from nothing. They are often called Fuyidai, and lately they have either already passed the family business to their descendants (Fuerdai) or are about to retire. Such medium-sized, completely private firms’ relationships with governments and the Party are relatively loose, compared to the first type of enterprises, due not only to their smaller employment and output size but also to their lower level of political embeddedness. In the second type of enterprises, the succession of family heirs may lead to new path creation. The new generation was mostly sent to top business schools abroad and spent a long time in the West. Exposed to professional management training in these business schools, as well as to Western ideas, cultures, ideologies, and values, these young successors tend to possess different attitudes toward relationships with the state and governments, toward the world outside the family and outsiders, and toward professionals, compared with their parents or grandparents. In contrast, even though the first type of enterprises changed from stateowned enterprises or town and village enterprises to joint-venture or private enterprises through a process of complete or partial privatization, Chinese governments still have significant influence over firm strategies and have a say on the appointment of management staff at the top level. Hence, unlike the Fuerdai in the second type of enterprises, the successors in the first type of enterprises cannot make decisions independently. In some cases, even the head of the company is nominated by the Party and governments. Leadership transmission does not necessarily mean


16

intergenerational succession, as entrepreneurs sometimes cannot pass the business to their descendants. Rather, successors nominated by the state must be a Party member and have close relationships with governments, though some of them may spend a brief period of time abroad. They also tend to be much older than the Fuerdai, and less exposed to new ideas and values outside China. More importantly, in the first type of enterprises, the ultimate goal may be associated more with the state’s social, political, and military considerations than with profit maximization. a. Political Lock-In In the interviews, some apparel entrepreneurs from the second type of enterprises complained that purportedly industry-wide policies were being applied preferentially to favor the first type of enterprises — the so-called key enterprises — because of two reasons. First, as noted above, the heads of this type of enterprises are often red capitalists who are Party members or former Party or government officials. These red capitalists were therefore highly embedded in the Party-state before going into the private sector, and their previous relationship with the state continues to pay big dividends in obtaining political, financial, and technological support from central and local authorities.50 Second, driven by China’s “grasp the large, let go the small” policy, financial aid and tax incentives have been disproportionately assigned to the so-called key apparel enterprises that have potential to create a considerable amount of employment, since the implicit and overarching spirit of national and Ningbo local policies is to invigorate key, large apparel enterprises and to leave the rest to fend for themselves. One apparel manager working in one of the first type of enterprises described their close relationship with governments as follows: We are the biggest taxpayer in this district, and of course it is easy for us to obtain policy support from governments. For instance, we have access to land at low prices. In the meantime, we are required to solve some problems that governments face. Several years ago, the head of one company in Ningbo went to gamble in Macau. He ended up with a large amount of gambling debts and ran away. Local governments asked us to take his company immediately, to avoid mass unemployment. In a word, we are interdependent with the governments. (interview, 2012, translated from Chinese)

Although political, financial, and technological support from govern-


17

ments might enable the first type of enterprises to innovate, upgrade, and lock out, some key apparel firms gradually adopted accumulation strategies that depended heavily or entirely on their beneficial access to central and local government support in the form of cheap land, tax credits, and bank loans. Rather than stimulating restructuring, this excessive dependence encouraged passive behaviors by local entrepreneurs even in the face of increasing competitive pressures. Enjoying such preferential access to government supports, particularly government programs that granted access to land at abnormally low prices, some large, key apparel firms even avoided risk-taking ventures and instead sought to capture rents from land speculation. Local authorities and firms, especially large ones, form a so-called self-sustaining coalition constantly lobbying for sectoral interventions often at a national or subnational level that constrain industrial restructuring and cripple the spirit of the Schumpeterian entrepreneur. On the other hand, the second type of enterprises has a different relationship with the government. The rapid expansion of the private sector in China and the high economic growth rates it has fostered have also been accompanied by increasingly severe official corruption.51 The first generation of entrepreneurs disliked bribes and other forms of official corruption, but viewed these as a regular part of doing business. Bribes were especially necessary to obtain large government purchase orders for garments (e.g., government uniforms). One interviewee indicated that one firm, in addition to regular bribes, even rented a plane to give tens of government officials a foreign tour in order to win a big government uniform procurement order. However, the second generation finds corruption unacceptable, because they have less access to decision makers and believe corruption is morally objectionable. First, unlike their parents who were born in the 1950s and 1960s and grew up in Ningbo, the younger generation grew up in modern society and mostly was sent by their parents to countries of the European Union and the United States to receive a better education. Few of them are Party members or willing to apply to join the Party. They have few connections with Chinese governments, and most of them are not used to do business based on bribes. A young entrepreneur who studied in the United Kingdom for seven years and just went back to inherit family business commented: I find bureaucracy, corruption and bribes extremely annoying. It is irony that I experienced “culture shock” when I came back to my homeland. All these


18

things make me feel insecure. My husband and I are planning to change our citizenship even though the company will stay here. (interview, 2013, translated from Chinese)

For her, the state’s commitment to economic development and the accumulation of private wealth is sometimes outweighed by the predatory demand of local officials. Second, the new generation’s dissatisfaction has been further compounded by the state’s discrimination against them. Under the so-called “grasp the large, let go the small” policies, the state has shown less interest in the role of the second type of enterprises, as it has not seen the potential for this type of enterprises to constitute the foundation of industry. One young entrepreneur complained: It may take those key enterprises one phone call to get several billion [Yuan] bank loan, while it takes us forever to even get in touch with the bank. (interview, 2012, translated from Chinese)

The new generation has therefore come to distrust the state, and, as competitive pressures increased, few of them have turned to the state so as to force the state to assist them by showing favoritism. Due to the succession of a new generation, the relationship between the state and the second type of enterprises has not developed in such a way as to engender political lock-in. b. Functional Lock-In Closely related to political lock-in is functional lock-in. Not only did the self-sustaining coalition between governments and the first type of enterprises result in political lock-in, but it also allowed the latter to maintain low-cost, low-end, and low-value-added apparel production even in the face of intensified competitive pressures. Such enterprises tend to lean on governments for critical support, giving rise to local clientelism that cripples innovation and creativity for endogenous restructuring. Their production system is based on hierarchical cost-cutting and subcontracting networks, whose driving force is the sustained demand on foreign markets. Our interviewees pointed out that much of the high value-added part of the apparel value chain, such as OBM and ODM production, however, has been integrated into extralocal networks in the European Union and United States, with these enterprises located in Ningbo becoming low-cost, captive suppliers and falling into a trap of


19

low-value-added production. In the face of intensified competitive pressures, they are still able to profit and remain low-cost producers merely because they can obtain bank loans, tax credits, and low-price land from the state. An apparel manager working in such an enterprise remarked: The increase of costs is eroding the profit margin drastically. Some firms already relocated to lower-cost locations. But we are fine and we will stay in Ningbo, because we are able to obtain low-price land. (interview, 2012, translated from Chinese)

As we noted above, in some cases firms that had access to land at abnormally low prices even sought to capture rents from land speculation, and real estate became one of their core businesses. Similarly, the second type of enterprises also entered the global value chain as low-cost suppliers for global lead firms during the first round of industrial restructuring. However, as costs rose and competitive pressures increased, it was increasingly difficult for them to maintain this exportoriented, low-wage model without preferential access to government supports. While the older generation expected the export market to continue to flourish and their low-cost, export-oriented production system to continue to work well, some well-educated young entrepreneurs, unlike their parents who lack the strategic intents to innovate and upgrade, seek to prove that they can not only maintain but also promote the family business. At the global level, they were discontented with the status quo in the global value chain, particularly the power asymmetry and uneven value distribution between them and global lead firms. Ningbo’s new entrepreneurs opted for upgrading to high-value OEM, ODM, and OBM production, or started new businesses directly from high-value OEM, ODM, or OBM production, because they believed their enterprises were able to do so after years of supplying global brands. As a result, the decade between 2000 and 2010 witnessed the advent of not only a new generation of entrepreneurs, but also a new type of enterprises whose characteristics were increasingly related to medium- and high-value production for domestic markets. While upgrading, new entrepreneurs started to outsource or relocate their low-value OEM and assembly production to inland China, not only to take advantage of the low labor cost in inland China, but also to compensate for previous underinvestment in this area and explore China’s rising domestic market. To minimize additional logistical costs


20

and lead time, they tended to outsource or relocate to geographically proximate regions (e.g., manufacturing bases in neighboring provinces), further deepening their integration into regional production networks (RPNs).52 Old entrepreneurs grew up together in Ningbo and tended to network among themselves. Some of them can speak only Ningbo dialect, which can hardly be understood by outsiders. This type of network, centered on friendship and place, with internal codes of conduct and business practices, is difficult for outsiders to penetrate. While such strong local networks or place-specific relational assets, to some extent, decreased the possibility of trans-local cooperation for old entrepreneurs, their descendants who grew up in modern society and mostly were sent by their parents to the European Union or United States tend to be more open to the outside world and are more willing to collaborate and formulate RPNs with outsiders. One young entrepreneur remarked: My father is a little “parochial.” It is not his fault. He grew up here, lived here for decades and he can’t even speak Mandarin very well. … I am trying to be open. … I know a guy who is a great apparel businessman. I asked him to join us in Ningbo several times. But he lived in inland China and wouldn’t want to move. In the meantime, I wanted to relocate part of our production to inland China. So we just built a new plant near his hometown and hired him there. Kill two birds with one stone. (interview, 2012, translated from Chinese)

The succession of a new generation facilitated the formation of RPNs and blurred the line between insiders and outsiders in the family business. Unlike what has been observed in some family business studies, where the successive lack of ambition in later generations serves to undermine businesses that once were flourishing,53 we argue that the Fuerdai, with different life experiences, knowledge, and values, are trying to prove they can create something without cutting corners, and maintain or even expand the family business. This ambition could also be sensed, to some extent, when they repeatedly emphasized that they preferred to be called the Chuangerdai rather than Fuerdai. c. Cognitive Lock-In For the first type of enterprises, their coalition with governments and local clientelism led to passive and captive behaviors. As costs rose and competitive pressures increased, they became less interested in investing


21

in production, innovation, and upgrades, and more focused on capturing rents from subcontracting and land speculation. This mercantilist entrepreneurship and the cognitive lock-in it generated gave rise to conflicts between some of the second type of firms that were genuinely interested in improving their learning capability through innovation, upgrading, and relocation (see above) and the so-called key enterprises that either clung to old paths or sought rents through speculation. When asked about the first type of apparel enterprises’ innovation and upgrading strategies in response to the intensification of competitive pressures, one young entrepreneur from one of the second type of enterprises illustrated this: I am not sure if some of them [the so-called key enterprises] could still be called as apparel firms. They are making more money from real estate than from apparel. (interview, 2012, translated from Chinese)

Although the first type of apparel enterprises became increasingly addicted to land speculation, the second type of enterprises developed on different trajectories. Unlike Wei, Li, and Wang’s and Cho and Hassink’s observation of a continuing cognitive lock-in across generation,54 we argue that the succession of a new generation in Ningbo has played a critical role in industrial restructuring and cognitive lock-out. It has to be noted that the second type of enterprises established by the first generation of entrepreneurs is characterized by dependence on strong local networks, familialism, reluctance to share control or responsibility, and reliance on price and cost competition. Recently all these characteristics have changed with the succession of a new generation. The local network with its common social networks and friendship ties made information exchange, communication, and cooperation between enterprises within the cluster much easier. It also enabled firms to imitate strategies and learn from local pioneers. These networks were particularly important in the reform era. Prior to 1978 enterprises lacked knowledge about export-oriented production, and as a result, imitation practices were crucial for the survival and revival of a cluster as a largely family-business-dominated, domestic-oriented industry shifted toward enterprise-led, export-oriented production. However, recently these imitation practices have resulted not only in a cognitive lock-in with little innovation and creativity, but also — in some instances — in low-quality products, particularly where the opportunities generated by export

22


growth encouraged firms to mimic other successful firms’ products rather than develop their own products or brands. As young entrepreneurs inherited family business, things changed. Young entrepreneurs were often sent by their parents to the West to study finance and business, the so-called popular and lucrative college majors, and were never embedded in local network as deeply as their parents. They focused more on innovation and upgrading, and did not want their innovation to be mimicked by other firms within the same cluster. They were more aware of intellectual property rights and viewed other entrepreneurs who used to be their parents’ friends as competitors, resulting in a formalization of the local social network. In addition, there have been three types of changes to the ownermanaged family business model and familialism. First, unlike their parents who were mostly tailors at first and then started family business in small family workshops or tailor shops, young entrepreneurs often know little about making garments. Instead, they were trained in business and finance, and focused more on professionalizing management especially at the top. Second, as we mentioned above, young entrepreneurs are less inward-looking, more open to the world outside the local cluster, and more willing to collaborate and network with outsiders. For instance, some firms started to hire from outside the cluster or included shareholders outside the family. Finally, old entrepreneurs, as tailors and owners, tended to focus on making apparel products they knew how to make or at least were familiar with, for example, in the case of Ningbo, men’s suits and shirts. Although they were proud of their skills as tailors, sometimes this limited their learning capability as business owners. In contrast, young entrepreneurs, who often knew little about making garments, decided to make apparel products they were interested in or they deemed profitable. To name a few, in a men’s-wear-productiondominated apparel cluster, a young entrepreneur started women’s wear production because she thought herself, as a young lady, knew the customers well; a young entrepreneur entered the outdoor sportswear industry because he was a fan of outdoor sports; a young entrepreneur began producing baby clothes because she had just given birth to a baby girl. More importantly, they made such decisions to take advantage of a booming domestic market, an ever-growing middle class (made up mainly of their coevals), income growth, and changes in the demand for goods in China. In a word, even though crucial strategic decisions may still be made by the owner-manager or head of the family, we argue that


23

these new-style enterprises often display more openness, and with the succession of a new generation, features of cognitive lock-in may be broken. d. Discussion Empirically, this article also shows how the industrial restructuring led by the Fuerdai in China’s coastal clusters has reshaped the economic geography of China’s apparel industry. While the first type of enterprises clung to old paths and remained in the high-cost coastal region since they could obtain bank loans, tax credit, and low-price land from the governments, the second type of enterprises pioneered a new round of industrial and spatial restructuring. On the one hand, the Fuerdai gradually professionalized their firms, actively diversified into new products, and upgraded from low-end assembly and OEM production supplying global brands to medium- and high-value production particularly for domestic markets. On the other hand, they also relocated or outsourced their low-end OEM and assembly production to low-cost inland China, particularly some geographically proximate regions, in order to minimize the additional logistical costs and lead time. The tightly integrated RPNs formed by Ningbo’s apparel firms allowed them to shed low-value production by outsourcing to subcontractors elsewhere, diversify their regional footprint, deepen their manufacturing skills, and focus on relatively high-value production. Theoretically, by examining the roles of the Fuerdai in the process of industrial restructuring in China’s coastal clusters, we seek to shed new light on the debates about cluster evolution and lock-in/out. This article contributes to recent studies in EEG by bringing firm agency and intrafirm dynamics to the forefront and investigating how they affect firms’ capabilities of creating new paths, resulting in path-dependent or path-breaking regional development. In addition to extra-firm lock-in/ out (i.e., political, cognitive and functional), we also need to acknowledge the key role of intrafirm lock-in/out — the lock-in/out of the firm agency. In our case, intrafirm lock-out could take place in the form of leadership lock-out with the succession of the Fuerdai endowed with different sorts of entrepreneurial tendencies from the Fuyidai, managerial lock-out that has resulted in the professionalization of family firms, and/or network lock-out as the new generation adopted a very different view toward outsiders. Such intrafirm lock-in/outs coexist and intertwine with extra-

24


firm lock-in/outs, coshaping China’s cluster evolution.

5. Conclusion While the Fuerdai generation has received plenty of attention and criticism in modern China, this article pays attention to the ways in which they are stepping up to play a key role in China’s economy as they hit their 20s and 30s. We argue that more than just rich children, this social group could have monumental effects on China’s industrial restructuring. China’s emergence as a key exporter to the world has relied on low-wage and unskilled or semiskilled labor and industrial clustering. The apparel industry exemplifies this export-oriented development model. With growth in other sectors, prices, land costs, wages, and competitive pressures have all arisen. These exogenous shocks have triggered industrial restructuring in China’s coastal clusters. This article draws on concepts developed in both EEG and family business studies to analyze the restructuring of China’s apparel industry. We are particularly interested in the roles played by the Fuerdai in the process of industrial restructuring and the ways in which China’s coastal clusters have been evolving with the formation of a new generation of entrepreneurs. To understand the ways in which the Fuerdai is breathing new life into the local cluster, we compared two types of enterprises through the lenses of three categories — political, functional, and cognitive lock-in. The first type of enterprises is the so-called key enterprises. They are key employers and taxpayers, and therefore are favored by the state. Such close connections also derive from their political embeddedness. The owners are often red capitalists, and the Party-state has a significant influence on firm strategies. Sometimes, there is no intergenerational transmission of leadership in such enterprises. The second type of enterprises refers to medium-sized firms that evolved from family workshops and small family business units to legally registered private enterprises and were embedded in dense local social networks. Such family business is completely owned and established by the head of the family, in the formal position of owner-manager. Their relationships with governments and the Party are relatively loose, compared to the first type of enterprises, due not only to their smaller employment and output size but also to their lower level of political embeddedness. As for the political lock-in, the first type of enterprises and


25

governments form a so-called self-sustaining coalition constantly lobbying for sectoral interventions that constrain industrial innovation and restructuring. On the other hand, the second type of enterprises has a different relationship with the state. The first generation of entrepreneurs disliked bribes and other forms of official corruption, but viewed these as acceptable. However, their descendants have few connections with Chinese governments, and most of them are not used to doing business based on bribes. Furthermore, the new generation’s dissatisfaction has been compounded by the state’s discrimination against them. Due to the succession of a new generation, the relationship between the state and the second type of enterprises could never develop in such a way as to engender political lock-in. This conforms with Granovetter’s arguments on the strength of weak ties versus the weakness of strong ties.55 The self-sustaining coalition between governments and the first type of enterprises also allowed the latter to maintain low-cost, low-end, and low-value-added apparel production even in the face of intensified competitive pressures. Similarly, the second type of enterprises also entered the global value chain as low-cost suppliers for global lead firms during the first round of industrial restructuring. However, as costs rose and competitive pressures increased, it was increasingly difficult for them to maintain this export-oriented, low-wage model without preferential access to government support. While the old generation tended to have a wait-and-see attitude and expected export markets to recover shortly, some well-educated, young entrepreneurs increasingly upgraded to domestic-oriented high-value OEM, ODM, and OBM production, and collaborated with outsiders to formulate RPNs. Finally, the coalition with governments and local clientelism of the first type of enterprises led to passive and captive behaviors. The mercantilist entrepreneurship and the cognitive lock-in it generated made the first type of enterprises become captured in speculative arrangements. The second type of enterprises was originally characterized by dependence on strong local networks, familialism, and reluctance to share control or responsibility, and reliance on price and cost competition. Recently all these characteristics have changed with the succession of a new generation. The new-style enterprises, created by the succession of a new generation, often display more openness, and therefore features of cognitive lock-in may be broken.


26

Ningbo’s contribution is not only empirical, directing our attention toward the roles of the Fuerdai in the process of industrial restructuring, and the ways in which cluster evolution, path dependence, and path creation have been shaped by the succession of a new generation of entrepreneurs in China’s apparel industry. It is also theoretical, reminding us never to underestimate the importance of firm agency and firm heterogeneity in cluster lock-in/out while using an evolutionary approach.

Notes 1 2 3

4

5

6 7 8

9

“China Rich List,” Forbes, October 2013, http://www.forbes.com/chinabillionaires/list/, accessed 9 June 2014. Tao Tao and Yi Yu, How Rich People Think: China’s Fuerdai Survey Report (Beijing: China Friendship Publishing Company, 2012). Shengjun Zhu and John Pickles, “Bring In, Go Up, Go West, Go Out: Upgrading, Regionalisation and Delocalisation in China’s Apparel Production Networks,” Journal of Contemporary Asia, Vol. 44, No. 1 (2014), pp. 36–63; Gary Gereffi, “Development Models and Industrial Upgrading in China and Mexico,” European Sociological Review, Vol. 25, No. 1 (2009), pp. 37–51. Masahisa Fujita and Dapeng Hu, “Regional Disparity in China 1985–1994: The Effects of Globalization and Economic Liberalization,” Annals of Regional Science, Vol. 35, No. 1 (2001), pp. 3–37; Canfei He, Y. H. Dennis Wei, and Xiuzhen Xie, “Globalization, Institutional Change, and Industrial Location: Economic Transition and Industrial Concentration in China,” Regional Studies, Vol. 42, No. 7 (2008), pp. 923–945; Shengjun Zhu and Canfei He, “Global, Regional and Local: New Firm Formation and Spatial Restructuring in China’s Apparel Industry,” GeoJournal, Vol. 79, No. 2 (2014), pp. 237–253. Zhu and Pickles, “Bring In, Go Up”; Jeffrey Henderson and Khalid Nadvi, “Greater China, the Challenges of Global Production Networks and the Dynamics of Transformation,” Global Networks, Vol. 11, No. 3 (2011), pp. 285–297; Chun Yang, “Restructuring the Export-Oriented Industrialization in the Pearl River Delta, China: Institutional Evolution and Emerging Tension,” Applied Geography, Vol. 32, No. 1 (2012), pp. 143–157. Yang, “Restructuring the Export-Oriented Industrialization.” Tao and Yu, How Rich People Think. Trevor Barnes and Meric Gertler, The New Industrial Geography: Regions, Regulation and Institutions (London: Routledge, 1999); Michael Storper, The Regional World: Territorial Development in a Global Economy (New York: Guilford, 1997). Ron Martin and Peter Sunley, “Path Dependence and Regional Economic


10

11 12 13

14 15 16 17 18

19 20

27

Evolution,” Journal of Economic Geography, Vol. 6, No. 4 (2006), pp. 395–437. Yang, “Restructuring the Export-Oriented Industrialization”; Gernot Grabher, “The Weakness of Strong Ties: The Lock-in of Regional Development in the Ruhr Area,” in The Embedded Firm: On the Socioeconomics of Industrial Networks, edited by Gernot Grabher (London: Routledge, 1993), pp. 255–277; Myungrae Cho and Robert Hassink, “Limits to Locking-out through Restructuring: The Textile Industry in Daegu, South Korea,” Regional Studies, Vol. 43, No. 9 (2009), pp. 1183–1198; Leo van Grunsven and Floor Smakman, “Industrial Restructuring and Early Industry Pathways in the Asian First-Generation NICs: The Singapore Garment Industry,” Environment and Planning A, Vol. 37, No. 4 (2005), pp. 657–680; Robert Hassink and Dong-Ho Shin, “The Restructuring of Old Industrial Areas in Europe and Asia,” Environment and Planning A, Vol. 37, No. 4 (2005), pp. 571–580; Robert Hassink, “The Strength of Weak Lock-Ins: The Renewal of the Westmünsterland Textile Industry,” Environment and Planning A, Vol. 39, No. 5 (2007), pp. 1147–1165. Grabher, “Weakness of Strong Ties,” p. 256. Hassink and Shin, “Restructuring of Old Industrial Areas.” Martin and Sunley,“Path Dependence and Regional Economic Evolution”; W. Brian Arthur, “Competing Technologies, Increasing Returns, and Lock-in by Historical Events,” Economic Journal, Vol. 99, No. 394 (1989), pp. 116–131. Grabher, “Weakness of Strong Ties.” Cho and Hassink, “Limits to Locking-out through Restructuring.” Ibid., p. 1185. Ibid.; van Grunsven and Smakman, “Industrial Restructuring and Early Industry Pathways.” Arthur, “Competing Technologies, Increasing Returns”; W. Brian Arthur, Increasing Returns and Path Dependence in the Economy (Ann Arbor: University of Michigan Press, 1994); Paul A. David, “Clio and the Economics of Qwerty,” American Economic Review, Vol. 75, No. 2 (1985), pp. 332–337; Martin Henning, Erik Stam, and Rik Wenting, “Path Dependence Research in Regional Economic Development: Cacophony or Knowledge Accumulation?,” Regional Studies, Vol. 47, No. 8 (2013), pp. 1348–1362; Ron Martin, “Roepke Lecture in Economic Geography— Rethinking Regional Path Dependence: Beyond Lock-in to Evolution,” Economic Geography, Vol. 86, No. 1 (2010), pp. 1–27; Ron Martin and Peter Sunley, “Conceptualizing Cluster Evolution: Beyond the Life Cycle Model?,” Regional Studies, Vol. 45, No. 10 (2011), pp. 1299–1318. Martin, “Roepke Lecture in Economic Geography”; Martin and Sunley, “Conceptualizing Cluster Evolution.” Ron Martin and Peter Sunley, “The Place of Path Dependence in an

28

21 22 23 24 25

26 27

28

29

30


Evolutionary Perspective on the Economic Landscape,” in The Handbook of Evolutionary Economic Geography, edited by Ron Boschma and Ron Martin (Cheltenham: Edward Elgar, 2010), pp. 62–92. Martin and Sunley, “Conceptualizing Cluster Evolution.” Ibid. Jörg Sydow, Frank Lerch, and Udo Staber, “Planning for Path Dependence? The Case of a Network in the Berlin-Brandenburg Optics Cluster,” Economic Geography, Vol. 86, No. 2 (2010), pp. 173–195. Martin and Sunley, “Path Dependence and Regional Economic Evolution.” Martin, “Roepke Lecture in Economic Geography”; Peng-Fei Li, Harald Bathelt, and Jici Wang, “Network Dynamics and Cluster Evolution: Changing Trajectories of the Aluminum Extrusion Industry in Dali, China,” Journal of Economic Geography, Vol. 12, No. 1 (2011), pp. 127–155. Martin, “Roepke Lecture in Economic Geography.” Martin and Sunley, “Path Dependence and Regional Economic Evolution”; Cho and Hassink, “Limits to Locking-out through Restructuring”; Koen Frenken, Frank Van Oort, and Thijs Verburg, “Related Variety, Unrelated Variety and Regional Economic Growth,” Regional Studies, Vol. 41, No. 5 (2007), pp. 685–697; Neil Coe, “Geographies of Production I: An Evolutionary Revolution?,” Progress in Human Geography, Vol. 35, No. 1 (2010), pp. 81–91. Neil M. Coe, Peter Dicken, and Martin Hess, “Global Production Networks: Realizing the Potential,”Journal of Economic Geography, Vol. 8, No. 3 (2008), pp. 271–295; Danny MacKinnon, “Beyond Strategic Coupling: Reassessing the Firm-Region Nexus in Global Production Networks,” Journal of Economic Geography, Vol. 12, No. 1 (2012), pp. 227–245. Coe, Dicken, and Hess, “Global Production Networks”; Nebahat Tokatli and Omur Kizilgun, “Upgrading in the Global Clothing Industry: Mavi Jeans and the Transformation of a Turkish Firm from Full-Package to BrandName Manufacturing and Retailing,” Economic Geography, Vol. 80, No. 3 (2004), pp. 221–240. Keetie E. Sluyterman and Hélène J. M. Winkelman, “The Dutch Family Firm Confronted with Chandler’s Dynamics of Industrial Capitalism, 1890– 1940,” Business History, Vol. 35, No. 4 (1993), pp. 152–183; Andrea Colli, The History of Family Business, 1850–2000 (Cambridge: Cambridge University Press, 2006); Andrea Colli, “Family Firms: Risks and Opportunities: The State-of-the-Art of the Debate,”Socio-economic Review, Vol. 11, No. 3 (2013), pp. 577–599; Max Smith, “‘Real’ Managerial Differences between Family and Non–Family Firms,” International Journal of Entrepreneurial Behaviour & Research, Vol. 13, No. 5 (2007), pp. 278–295; Alex Stewart and Michael A. Hitt, “Why Can’t a Family Business Be More Like a Nonfamily Business? Modes of Professionalization in Family Firms,” Family Business Review, Vol.


29

25, No. 1 (2012), pp. 58–86. 31 Manfred F. R. Kets de Vries, “The Dynamics of Family Controlled Firms: The Good and the Bad News,”Organizational Dynamics, Vol. 21, No. 3 (1993), pp. 59–71. 32 Smith, “‘Real’ Managerial Differences”; Stewart and Hitt, “Why Can’t a Family Business Be More Like a Nonfamily Business?”; Carl Magnus Bjuggren, Dan Johansson, and Hans Sjögren, “A Note on Employment and Gross Domestic Product in Swedish Family-Owned Businesses: A Descriptive Analysis,” Family Business Review, Vol. 24, No. 4 (2011), pp. 362–371; Andrea Colli, Paloma Fernández Pérez, and Mary B. Rose, “National Determinants of Family Firm Development? Family Firms in Britain, Spain, and Italy in the Nineteenth and Twentieth Centuries,” Enterprise and Society, Vol. 4, No. 1 (2003), pp. 28–64. 33 Gary Hamilton, “Reciprocity and Control: The Organization of Chinese Family-Owned Conglomerates,” in The Globalisation of Chinese Business Firms, edited by Henry Yeung and Kris Olds (New York: Macmillan, 2000), pp. 55–74. 34 Henry Yeung, Chinese Capitalism in a Global Era: Towards Hybrid Capitalism (London: Routledge, 2004). 35 Rajeswary Ampalavana Brown, Chinese Big Business and the Wealth of Asian Nations (London: Palgrave, 2000). 36 Colli, Pérez, and Rose, “National Determinants of Family Firm Development.” 37 Colli, “Family Firms”; Yeung, Chinese Capitalism in a Global Era. 38 Mary B. Rose, “Networks and Leadership Succession in British Business in the 1950s,” European Yearbook of Business History, Vol. 1 (1998), pp. 57–74. 39 Henry Wai-chung Yeung, “Limits to the Growth of Family-Owned Business? The Case of Chinese Transnational Corporations from Hong Kong,” Family Business Review, Vol. 13, No. 1 (2000), pp. 55–70. 40 Yeung, Chinese Capitalism in a Global Era. 41 Chunling Xia et al., “Annual Report of Ningbo’s Apparel Industry” (Ningbo, China: Zhejiang Textile & Fashion College, 2012). 42 Guoqiang Chen and Xiaofeng Zhang, Costumes Observation in Ningbo (Beijing: China Textile and Apparel Press, 2008). 43 Linfei Zhao and Qingliang Gu, “Corporate Social Responsibility in China Apparel Industry,” World Academy of Science, Engineering and Technology, Vol. 51 (2009), pp. 218–222; Li & Fung Research Centre, “Textile and Apparel Clusters in China,” in Industrial Cluster Series, Vol. 5 (Hong Kong: Li & Fung Research Centre, 2006), pp. 1–20. 44 Zhu and Pickles, “Bring In, Go Up.” 45 Ibid.; Yang, “Restructuring the Export-Oriented Industrialization.” 46 He, Wei, and Xie, “Globalization, Institutional Change, and Industrial Location.”

30


47 Chen and Zhang, Costumes Observation in Ningbo. 48 Grabher, “Weakness of Strong Ties.” 49 Jie Chen and Bruce J. Dickson, “Allies of the State: Democratic Support and Regime Support among China’s Private Entrepreneurs,” China Quarterly, Vol. 196 (2008), pp. 780–804; Jie Chen and Bruce J. Dickson, Allies of the State: China’s Private Entrepreneurs and Democratic Change (Cambridge, MA: Harvard University Press, 2010). 50 Chen and Dickson, “Allies of the State”; Chen and Dickson, Allies of the State. 51 Wenfang Tang, Public Opinion and Political Change in China (Stanford, CA: Stanford University Press, 2005). 52 Frederick H. Abernathy, Anthony Volpe, and David Weil, “The Future of the Apparel and Textile Industries: Prospects and Choices for Public and Private Actors,” Environment and Planning A, Vol. 38, No. 12 (2006), pp. 2207–2232; Meenu Tewari, “Adjustment in India’s Textile and Apparel Industry: Reworking Historical Legacies in a Post-MFA World,” Environment and Planning A, Vol. 38, No. 12 (2006), pp. 2325–2344. 53 David Landes, Dynasties: Fortunes and Misfortunes of the World’s Great Family Businesses (New York: Viking Press, 2006). 54 Y. H. Dennis Wei, Wangming Li, and Chunbin Wang, “Restructuring Industrial Districts, Scaling up Regional Development: A Study of the Wenzhou Model, China,” Economic Geography, Vol. 83, No. 4 (2007), pp. 421–444; Cho and Hassink, “Limits to Locking-out through Restructuring.” 55 Mark Granovetter, “The Strength of Weak Ties,” American Journal of Sociology, Vol. 78, No. 5 (1973), pp. 1360–1380.